With the arrival of Peak Oil, the curtain has closed on Act 1 of the drama Petroleum Man. What will happen in Act 2? Chekhov said, "If there's a gun on the wall at the beginning of the play, by the end it must go off." In the world's nuclear arsenal are many guns on the wall. If life copies art, will there be an Act 3 in which the players, having learned their lesson the hard way, live sustainably? To explore these and other questions... FTW's Act 2 Blog. Read, comment, take heart! Orkin

Tuesday, January 13, 2009

NOW THIS IS BEAUTIFUL... AND SO RUSSIAN!WHY RUSSIA SHUT OFF THE GAS TO THE EU

Russia is carving geoplitical turf like a Thanksgiving turkey. It's electric knife is powered by geography. Both Georgia and Ukraine -- under highly-transitory, pro-Western regimes -- were actually trying to join NATO. Think of that!... Military buffs, think of a bridge at Eindhoven. The U.S. commanded this strategy in hopes of weakening Russian influence in a post-industrial world. The Russians have played a great game of "rope-a-dope" here. Their primary objective is to reassert control over the most Russian country that is not inside Russia herself: Ukraine. Ukraine is almost surrounded now but the following new report on the effects of the gas shut off explains the grander strategy. The countries hardest hit by the shutoff are the eastern European EC member like the Czech Republic, Slovenia, Slovakia, etc... These are old Warsaw pact regions and they are hurriedly sending ministers on emergency missions to Moscow... To beg!

Let me take a shot at what Medvedev/Putin might convey. (For some reason I just love writing about Russians. They are actually straightforward in ways incomprehensible to the west. They are vastly more efficient from a geopolitical standpoint.)

To the minister from the Czech Republic:

"Tovarich, good to see you again. We are so terribly sorry that Ukraine has caused all this trouble... By the way, how have you enjoyed your experience in the West? Did you find it profitable? How are your prospects looking? This was a mistake made by the government in Ukraine. It chose to commit to the West, and as the West collapses it brings their troubles for all of us. Don't you think so? There is a possibility that we might help restore gas flows to your (small, landlocked, energy-poor) nation. It would be expensive for us and we would expect some concessions. Are you amenable? We can do what they cannot, Tovarich. We can keep you warm and we can feed you... especially if the productive wealth of the Ukarine is not shipped to Western markets. By making Ukraine belong to Mother Russia we will all eat."

Ukraine, regardless of those who might wish otherwise, is, and will always be Russian turf. At the end of the Age of Oil, geography is proving the mightiest force of all and "relocalize" has many meanings.

As someone else said, "The Russians are playing chess and the Americans are playing Monopoly".

"[M]any people believe it was a speculative bubble, not unlike the one that caused the housing crisis,"

...except that it didn't pull the rug out from under the global economy.

The people being able to hold only one idea in their heads at a time, the media shape their soundbites according to the outrage du jour.

Speaking of which, considering the proposed solution to our economic ills - the hair of the dog that bit us ie, piling on still more debt - today The Daily Reckoning proposed for Treasury Secretary the guy who best understands Ponzi schemes, Bernie Madoff.

Craig Murray was sacked as the British embassador to Uzbekistan in 2004, after accusing the Karimov administration of human rights abuses and denouncing the use of intelligence gained by torture there. That was the subject of his first book, Murder in Samarkand (2006).

His new book, Catholic Orangemen of Togo, deals with... his adventures in West Africa from 1997 to 2001 as a functionary of the British diplomatic service, from which he retired in 2005 to pursue active opposition to the present UK government.

The book details British mercenary involvement in Africa and its motives. Notably, it addresses the row that erupted over illegal arms shipments from the UK to Sierra Leone and the involvement of the UK High Commissioner Peter Penfold and Tim Spicer in those shipments.

He echoes my feelings that cheap oil will destabilize some countries that we consider inimical to our interests.

Another consequence,taking a cue from your own point of view, is that cheap oil, with its deleterious effects on some countries that are relatively poor except for their oil reserves, may jump-start the global population dieoff in a big way----and of course, it won't be OUR fault, now, will it? Plausible deniability abounds.

I agree with Mike on this, but I also think, that there is an underground hydrocarbon war being waged between USA and Russia.

Russia is very much dependent on it's export of hydrocarbon fuels, and current prices of oil - wich are (artificially) falling to all time low - are hurting Russia bad. Russia is exporter of oil. USA is importer of oil.

I wonder if USA can influence on the price of crude oil directly (or indirectly). If so, than the current European gas crisis is simply an answer to the America's influence on oil prices.

It is then the Russia's attempt to swing the eastern part of Europe, wich became very pro-western in past two decades, back toward east.

The thing is, that the current crisis is solely about natural gas. Liquefied Petroleum Gas (LPG) wich is also in wide use in Europe (especially with home-consumers in Slovenia), actually comes from Dutch company SHV Gas.

The abovementioned Dutch company (SHV Gas) is a worldwide player and is the biggest LPG supplyer in Europe. The plus side is also that the LPG is transported not only by pipes, but mainly by rail and trucks (to Slovenia) - the country is thus tottaly independent from the exporter's disrepair of pipeline system and/or fuzzy political situation.

Converting to this type of gas should not be too difficult - probbably just a technical issue - and would immediately and effectively end whatever game Russia is playing.

The only downside of LPG is it's price, wich is currently one of the more expensive types of heating for your home.

But honestly - would you prefer to cling to cheap but unsure gas supply (wich would bring certain consessions with it, that you would NEVER agree to if the weather was warm), or pay a little more and remain independent.

Finally, I would like to thank Mike, Jenna and this community for changing me in a way that (apart from my two children being born) NOTHING in my life changed me so profoundly. I was allways a city boy and born into the strictly consummer society. This weekend, however, my wife and me are going on a tour of checking some arable land we plan on buying.

Even if ALL of what is written on this blog would prove to be false in the comming months, my family will still have a suply of healthy fresh produce, not to mention the very needed exercise I will get from working the land.

Mike, it is only natural that the Russians should do this now that the world situation is coming to this pass. What is it that the US and its allies haven't left undone previously, tell me. Heh, heh, heh... You know all that, as you have documented it extensively yourself.

Freight rates for containers shipped from Asia to Europe have fallen to zero for the first time since records began, underscoring the dramatic collapse in trade since the world economy buckled in October..........The BDI – though a useful early-warning index – is highly volatile and exaggerates apparent ups and downs in trade. However, the latest phase of the shipping crisis is different. It has spread to core trade of finished industrial goods, the lifeblood of the world economy........."This is no regular cycle slowdown, but a complete collapse in foreign demand," said Lindsay Coburn, ING's trade consultant.

I'm new to posting here but am a longtime reader/subscriber of/to FTW. I would only like to suggest an educational resource for people you know that need an introduction to the historical situation we are living in. I consider it a good introduction to the topics addressed here. I am open to suggestion and commentary about this post so, please do-

the resource: http://www.chrismartenson.com/ I just sat through (over the last three days) the "crash course" and appreciated the synthetic work, I hope you will as well.

paris 19, I also strongly vouch for Chris Martenson's Crash Course. IMO, it is as quick, clean and simple an introduction and overview to the major dynamics in play as one is liable to get.

The only problem that I personally have with the site is that a lot of the commentary seems to be cornucopian in nature, coming from investors, i.e. Chris has got it figured out and it'll all be okay again once we get through this nasty spell.

It seems to me that the true intent of the Crash Course is not registering in the way that Chris may have intended.

I attended a Rotary round table seminar on Energy yesterday. Speakers were a former nuclear scientist to speak about energy in general, touching on Peak Oil. He was very general about that subject, seeming not wanting to be an alarmist.

Other speakers were from the local electrical co-op and spoke to the lack of adequate supply growth and the likelihood of rolling blackouts from 2009 to 2012 depending on national region. The NW Illinois co-op is contructing a power plant designed to run on bio-mass in the next county over and is in the process of erecting a large, three parcel wind farm in this county.

Conservation issues were stressed, as well as the growth of "no load" devices. (Any transformer or consumer electronic device) This represented the greatest percentage increase in demand growth. A point made was that ever new technology requires ever more energy. I noted to a friend seated next to me that complex, high tech systems dependent upon energy will fail as that needed energy is no longer available.

At lunch it was easy to spot the old paradigm hanger-ons. "Drill baby drill" was their solution. From the suppositions and statistics they were clinging to, one might suspect that their source of information was FOXNEWS.

At Rotary meetings I have vocally challenged the idea that fractional reserve banking, the financial markets and the perpetual growth paradigm could continue in an era of energy growth limitations and have met with some support, but many have so much vested in the system, they can't help but cling to it.

My question to a retired Navy officer was that I wanted to know what the black market currency would be when dollar devaluation leads to price controls on food and energy and then rationing. (Any ideas Mike?)

The seminar brought home the seriousness of net usable energy depletion by conveying a sense of urgency. Whether the system can hold together in order to manage the on-going collapse remains to be seen.

brisa, re "A point made was that ever new technology requires ever more energy. I noted to a friend seated next to me that complex, high tech systems dependent upon energy will fail as that needed energy is no longer available."

Great comment, brisa. The laws of thermodynamics are still a major blind spot for cornucopians of all stripes. Re a proposed green economy, we simply cannot get there from here. The initiative to do so will simply translate into the last bubble.